VIA ELECTRONIC DELIVERY TO REGULATIONS.GOV

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1 February 27, 2014 VIA ELECTRONIC DELIVERY TO REGULATIONS.GOV Ms. Monica Jackson Office of the Executive Secretary Bureau of Consumer Financial Protection 1700 G Street, N.W. Washington, DC Re: Comments on the Advance Notice of Proposed Rulemaking on Debt Collection, Regulation F (Docket Number CFPB ; RIN: 3170-AA41; 12 CFR Part 1006; Federal Register Number ) Dear Ms. Jackson: ACA International ("ACA") files this comment on behalf of its nearly 5,000 members worldwide in response to the Bureau of Consumer Financial Protection s ( CFPB ) Advance Notice of Proposed Rulemaking related to debt collection ("ANPR"). In the ANPR, the CFPB seeks comments and information about debt collection practices as it considers rulemaking related to debt collection. In proposing rules related to debt collection, ACA strongly encourages the CFPB to strike an appropriate balance between protecting consumers from harmful practices and ensuring that the consumer debt collection market functions in a fair, transparent, and competitive manner without undue burden on legitimate debt collection businesses. ACA strongly supports efficient and effective rules and regulations that will help consumers fulfill their financial goals and responsibilities while maintaining the facilitation of the credit market. ACA members strive to provide financial management assistance to consumers in a responsible way. As 4040 WEST 70 TH STREET ND STREET NE, WASHINGTON, D.C P.O. BOX , MINNEAPOLIS, MN TEL +1(202) TEL +1(952) FAX +1(952) FAX +1(202) ACA@ACAINTERNATIONAL.ORG

2 such, ACA believes that respectful, two-way communication is critical for transparency and dispute resolution. Any rules created should also recognize the interaction between and among various entities in the collections and credit cycle, including consumer reporting agencies, creditors, account owners and debt collectors, with each entity in the chain responsible for those matters in which they have the most control and influence. Specifically, ACA encourages the CFPB to recognize that the debt collection market is extremely varied in the types of debts being collected and the nature and size of our nation s debt collectors encompasses a broad scope. Although the credit and collections industry comprises a relatively small space in the entire consumer financial services arena, the client base serviced by industry members is highly diverse, from large corporations to local Main Street service providers all of whom have a vested interest in customer retention, particularly in the case of small business creditors. From medical debt to student loan debt, mortgage debt to credit card debt, unpaid check to unpaid government fees, or a single bill from a local business, the differences incident to each type of debt require a thoughtful and nuanced regulatory approach. New rules must also accommodate the differences and roles of market participants and provide a flexible framework in which legitimate debt collectors can maintain their vital role in the credit cycle. When imposing additional regulatory requirements on industry participants, ACA also urges the CFPB to appropriately tailor those requirements to the specific circumstances for which any perceived problem exists. When regulations that are overly broad in application are used as a blunt tool in remediating perceived consumer harm, the businesses that are subject to those regulations are often adversely impacted and unduly burdened. Regulatory precision is essential to ensure a healthy and vibrant market. The CFPB notes the need to address consumer protection concerns given the high volume of complaints received regarding debt collectors. The CFPB s 2012 Annual Report on the FDCPA stated that 30 million individuals had a debt that was subject to the collections process while 142,743 complaints were filed with the FTC regarding debt collectors in Importantly, the CFPB noted that not all complaints comprise a legal violation as a matter of fact, the CFPB s own definition of a complaint includes a consumer s expression of mere dissatisfaction. Given that in 2011, over 29.8 million Americans with debts in collections did not file complaints, the percentage of consumers who filed complaints with the FTC was less than one-half of 1% of all consumers with debts in collections. In 2013, the CFPB s Annual Report on the FDCPA notes that the volume of complaints declined by 13.4%, to 125,136 complaints, despite an overall rise in debt holders, with household debt increasing in the third quarter of 2013 alone by $127 billion. 1 The CFPB acknowledges as well that the number of complaints received corresponds to only a small fraction of the overall number of consumers contacted. While debt collection complaints comprise a mere fraction of a percentage point of the number of consumers with debts in collections, third-party debt collectors are highly committed to resolving consumer complaints. According to the 2012 Better Business Bureau report on Complaint Inquiries and Statistics, third-party debt collectors resolved 86% of the consumer complaints received higher than the national average of 77% for all other businesses. Also, ACA strongly encourages the CFPB to address outdated, unnecessary or unduly burdensome legal requirements under the federal Fair Debt Collection Practices Act ( FDCPA ), commensurate with the CFPB s authority. Since the FDCPA was enacted in 1977, a number of significant technological and telecommunications innovations have altered consumer preferences and methods 1 Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit Report, November,

3 in which information is obtained that allow consumers to interact with the larger financial economy. Moreover, the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( Dodd-Frank Act ) changed the legal landscape for regulating the delivery of financial services to consumers. In the credit and collection industry, the advent of debt buying as a further means of debt recovery has also impacted the manner in which industry participants provide and deliver financial services. Although the legislative history of the FDCPA included a call for it to be revisited and modernized as appropriate, the law has not been significantly updated or modernized since its inception. As a result, where regulatory uncertainty exists within the statute, the judicial arm, charged with interpreting and applying the FDCPA, has rendered a legal patchwork of federal and state case law that is highly inconsistent among jurisdictions. Finally, ACA requests that the CFPB strive for maximum clarity in any forthcoming regulations to ensure the regulatory compliance obligations of industry participants are certain, and to develop model language, disclosures, forms and examples of compliant behavior, whenever practicable, in order to create appropriate safe harbors from regulatory enforcement and private civil litigation that seeks to exploit legal and regulatory uncertainty to the detriment of debt collectors. As the CFPB proceeds in its consideration of the efficacy of proposed rules related to debt collection, ACA respectfully requests due consideration be given to the comments on the ANPR, as listed below. I. Background on ACA International ACA International is the trade association for credit and collection professionals. Founded in 1939, and with offices in Washington, D.C. and Minneapolis, Minnesota, ACA represents nearly 5,000 members, including credit grantors, collection agencies, attorneys, asset buyers, and vendor affiliates. ACA members range in size from small businesses with a few employees to large, publicly held corporations. These members include the very smallest of businesses that operate within a limited geographic range of a single town, city, or state, and the very largest of national corporations doing business in every state. The majority of ACA members, however, are small businesses, collecting rightfully owned debts on behalf of other small and local businesses. Approximately 2,000 of the association s 5000 members maintain fewer than ten employees, and more than 2,500 of the members employ fewer than twenty persons. As part of the process of attempting to recover outstanding payments, ACA members are an extension of every community's businesses. ACA members work with these businesses, large and small, to obtain payment for the goods and services already received by consumers. In years past, the combined effort of ACA members has resulted in the annual recovery of billions of dollars dollars that are returned to, and reinvested by, businesses, and dollars that would otherwise constitute losses on the financial statements of businesses. Without an effective collection process, the economic viability of these businesses, and, by extension, the American economy in general, is threatened. Recovering rightfully-owed consumer debt enables organizations to survive, helps prevent job losses, keeps credit, goods, and services available, and reduces the need for tax increases to cover governmental budget shortfalls. Indeed, a study published by the Federal Reserve Bank of Philadelphia found that strict regulations which impede the ability of debt collectors to operate 3

4 effectively results in a reduction in the supply of credit, which in simple economic terms, forces all Americans to pay higher prices to compensate for uncollected debt. 2 In 2011, Ernst &Young conducted a study 3 to measure the various impacts of third-party debt collection on the national and state economies. In addition to recovering rightfully-owed consumer debt totaling $44.6 billion in 2011 alone, the study found that third-party debt collectors directly provided over 148,000 jobs and $5 billion in payroll. When factoring in jobs created indirectly, those numbers doubled to 302,000 jobs and $10 billion in payroll. The study also concluded that thirdparty debt collectors paid $509 million in state and local taxes and $495 million in federal taxes. The total state and local tax impact of third-party debt collectors was $1 billion, and the total federal impact was $970 million. II. Comments of ACA International With respect to the particular questions contained in the ANPR, ACA offers the following comments: TRANSFER AND ACCESSIBILITY OF INFORMATION UPON SALE AND PLACEMENT OF DEBTS Information Transferred Between Debt Owners and Debt Buyers or Third-Party Collectors Q1. What data are available regarding the information that is transferred during the sale of debt or the placement of debt with a third-party collector and does the information transferred vary by type of debt (e.g., credit card, mortgage, student loan, auto loan)? What data are available regarding the information that third-party debt collectors acquire during their collection activities and provide to debt owners? The information provided during the sale or placement of a debt is agreed to by contract between the parties involved in the sale or placement, and varies by the type of debt being sold or placed. For debt that is placed with a third-party collector, the basic data that accompanies the account generally includes most or all of the following: name, last known address and telephone number, interest rate/apr, Social Security Number, date of birth, the date and the amount of the last payment made, current balance, and the date of account opening or date of service. If a judgment has been granted, proof of such judgment would customarily be included. In some instances, third-party debt collectors have direct access to the debt owner s records regarding the debt, including access to any documents, contracts, or other underlying agreements. Additional information may be included based on the type of debt subject to transfer. For example: Credit card debt placements may include past statements or date of last charge, as well as any charge-off amounts. 2 Working Paper No , Debt Collection Agencies and the Supply of Consumer Credit, Viktar Fedaseyeu, Federal Reserve Bank of Philadelphia, May 20, Ernst &Young, The Impact of Third-Party Debt Collection on the National and State Economies, February, 2012, available at acaeconomicimpactreport.pdf. 4

5 Student loan debt may include additional background documents, pursuant to the documentation required for obtaining such loans, including identifying information regarding family members and/or co-makers. Mortgage and automobile loan debt may include original contracts and other documents provided at the time of sale. Medical debts typically include any medical insurance carrier, amount of insurer payment, and signed HIPAA releases. Hospitals collecting debts customarily have access to more debtor information than ambulatory or other service providers, based on the required intake forms. Utilities debts may include the start and disconnect dates of services provided. Services sold by a reseller, such as mobile telephone, cable TV or satellite TV, may also include the name of the dealer from whom service was contracted and information about the equipment the consumer received related to the service. In cases when debt is sold, information may be either unavailable or difficult to obtain, particularly when the buyer lacks a direct relationship with the original creditor, and especially when debt has been purchased and sold multiple times. Many debt buyers routinely have access to additional documentation. For older debts, however, original creditors may no longer be in business, and the underlying contract may be unavailable. With regard to information that third-party debt collectors may acquire during collection activities and pass along to debt owners, such information would largely depend on the business agreement between the parties, the type of debt and collection services provided, and applicable law. Typically, any disputes or validation requests received (including fraud or identity theft notification) would be relayed to the debt owner for review and resolution, with collection efforts for the account placed on hold until such dispute is resolved. Additionally, updated contact information received would be provided to the debt owner. The credit and collections industry is also mindful of the flow of personally identifiable and sensitive information. Given the increased chance of security and data privacy issues when sensitive documentation is passed along, collectors seek to balance the need for information with the consumer s expectations of privacy and security. Q2. Does the cost of a debt that is sold vary based on the information provided with the debt by the seller? Are there certain types of debts that are not sold, such as debts a consumer has disputed, decedent debt, or other categories of debt? In all cases, the price is a function of the amount expected to be collected - greater likelihood of collection will render a debt more valuable and garner a higher price. Although the price of a debt that is sold can be affected by the quality of accompanying documentation regarding the original sale, it is merely one factor in the cost. Additional price and value factors that are generally considered include the age of the debt/original account, location of the debtor, presence of a judgment, and whether such debt has previously been placed for collection. Older debts usually sell at a lower price than newer debts. Debt buyers may also choose to pay more for a debt for which statements are available at the time of sale as the costs of locating the consumer and collecting the debt may ostensibly be less. 5

6 Debts that are not typically made available for sale include debt that is the subject of fraud or identity theft, discharged in bankruptcy, and decedent debt. No legitimate debt buyer has an interest in intentionally contacting a wrong party or seeking a wrong balance, especially given the costs of doing so. Q3. The OCC recently released a statement of best practices in debt sales which recommends that national banks monitor debt buyers after sales are completed to help control and limit legal and reputation risk. What monitoring or oversight of debt buyers do creditors currently undertake or should they undertake after debt sales are completed or after debts are placed with third parties for collection? Debt owners routinely retain the right to audit a debt buyer s records regarding accounts sold and the debt buyer s compliance with the underlying sales agreement. Debt owners also routinely retain the right to buy back accounts for which continued collection efforts could create legal or reputational risk for them. Banking institutions, the largest 19 of which combined have sold nearly $37 billion in charged-off debt annually 4 in recent years, are further expected by their prudential regulators to have compliance and risk management policies and procedures governing debt sales and monitoring of third-party vendors, including collection agencies. Q4. If debt buyers resell debts, do purchasers typically receive or have access to the same information as the reseller? Do purchasers from resellers typically receive or have access to information or documentation from the reseller or from the original creditor? Do conditions or limitations on purchasers from resellers obtaining information from the resellers or the original creditors raise any problems or concerns? If a debt buyer resells debts, purchasers typically receive or have access to the same information as the reseller. In some instances, however, data access can become more restrictive over time given contractual requirements in the underlying debt sale agreement and/or the data retention policies of the original creditor. Information Related to FDCPA Provisions Q5. To what extent do debt owners transfer or make available to debt buyers or third-party collectors information relating to: Disputes (e.g., that a debt had been disputed, the nature of the dispute, whether the debt had or had not been verified, the manner in which it was verified, and any information or documentation provided by the consumer with the dispute); unusual or inconvenient places or times for communications with the consumer (e.g., at the consumer's place of employment); cease communications requests; or attorney representation? What would be the benefits and costs of debt buyers and third-party collectors obtaining or obtaining access to this information upon sale or placement of the debt? To what extent do third-party debt collectors provide this information to debt owners? What would be the costs and benefits of third-party collectors providing this information to debt owners? Generally, the debt owner determines what information is provided at the time of placement. Some provide very detailed information about the debt, while others may not. 1 Statement on Oversight of Debt Collection and Debt Sales, OCC Testimony before the Senate Committee on Banking, Housing, and Urban Affairs, Shining A Light on the Consumer Debt Industry, July 17,

7 With regard to the placement of a debt with a third-party debt collector, dispute and bankruptcy information (including communications requests, cease collections communication requests, and attorney representation), is usually included. When debt owners do not provide such information, third-party debt collectors may need to perform due diligence to ascertain this data directly, in order to ensure compliance with applicable law. If debt is sold, the cost of obtaining historical information regarding the account rests with the buyer. When a creditor retains ownership of a debt but places the debt with a third-party debt collector, the cost of forwarding information remains with the creditor. Dispute information is viewed as vital by debt collectors, but the cost and benefit calculation is different based on the party involved. For third-party debt collectors and debt buyers, obtaining robust information regarding disputes at the time of placement or sale could potentially reduce consumer complaints and attendant costs. Additionally, if such information were to be included upon sale of a debt, the information could be more readily available in the event of resale of the debt. From a creditor perspective, the cost of providing such information upon placement or sale could be high, given the additional time required for the creditor or its billing companies to locate, review, and potentially redact information. Such a process would likely not be systematic, but rather a manualintensive process. To the extent such information would be shared systematically, there would likely be significant technology expense incurred in the modification of creditors existing systems. For third-party debt collectors and debt buyers, if additional information were required at the time of placement or sale, there likely would be associated costs in obtaining this information including additional review of the information, data entry, and systems storage and related information technology expense. On average, less than 1% of accounts sold or placed for collection result in consumer disputes. As such, requiring additional documentation of all debts at the time of placement or sale would be unduly burdensome and expensive for the businesses that operate in the industry. This undue burden and expense would not have a corresponding benefit (or if so, such perceived benefit would be dramatically outweighed by the burden and expense). Although debt owners policies and procedures vary, third-party debt collectors notify their debtowner clients of their responsibilities to verify and validate debts in accordance with the FDCPA. Third-party debt collectors customarily provide debt owners with notices of dispute, unless the debt collector has the requisite information to address the dispute directly. Additional Information Q6. To what extent do debt owners transfer or make available to debt buyers or third-party collectors information relating to: The consumer's understanding of other languages (if the consumer has limited English proficiency); the consumer's status as a servicemember; the consumer's income source; or the fact that a consumer is deceased? What would be the benefits and costs of debt buyers and third-party collectors obtaining or obtaining access to this information upon sale or placement of the debt? To what extent do third-party debt collectors provide this information to debt owners? What would be the costs and benefits of third-party collectors providing this information to debt owners? 7

8 Debt owners will occasionally have knowledge of a consumer s special circumstance (e.g. limited English proficiency, active duty military status, source of income, living or deceased status), but in many instances, it is the third-party debt collector who will uncover such information during the course of trying to help the consumer resolve the debt. Additionally, debt buyers and attorneys engaging in debt collection may have business processes that assist them in identifying military or deceased status. Nonetheless, if creditors do not specifically request special status information, there is no information available to provide to a debt buyer or third-party debt collector at the time of debt sale or placement. Moreover, a creditor cannot be expected to know whether a consumer has been deceased between the time of account opening and the collection. Further, if the original creditor does not have access to such information, any subsequent debt owner would further lack such knowledge, as the information would not exist to be transferred along with the debt. The investigative costs of obtaining account-specific and consumerspecific information regarding certain special and comparatively, rare, circumstances, would be significant, and in exchange for minimal overall benefit. Q7. Is there other information that has not yet been mentioned that should be required to be transferred or made available with a debt when it is sold or placed for collection with a third-party collector? What would be the costs and benefits of debt buyers and third-party collectors obtaining or obtaining access to this information upon the sale or placement of a debt? The costs to debt collectors would significantly outweigh the benefits of obtaining this information at the time of sale or placement of the debt. Debt collectors generally do not have the capability to store all the data the client would have stored. Further, the passing of information back and forth between the debt owner or creditor and the debt collector can result in corruption of the data or other technology-related glitches that could cause harm to consumers. Debt buyers, on the other hand, often negotiate receipt of documentation into the sale agreement, either obtaining it upon delivery of the accounts, providing for a process for the buyer to access the documentation on demand, or otherwise obtaining access to the documentation. Documentation (Media) Q8. Please describe debt collectors' access rights to documentation such as account statements, terms and conditions, account applications, payment history documents, etc. What restrictions are most commonly placed on these access rights? Do these restrictions prevent or hinder debt collectors from accessing documentation? While information transferred varies by the type of underlying debt involved, when needed, thirdparty debt collectors are usually able to obtain such information upon request made to the debt owner. There are exceptions, however, such as in the case of HIPAA requirements for patient privacy in medical debt portfolios. In some instances, third-party debt collectors may have access to the debt owner s data systems, but such functionality is largely dependent on the relationship between the debt owner and the third-party debt collector, the type of debt involved, and the data systems employed. Q9. Part III.A below solicits comment on whether the last periodic statement or billing statement provided by the original creditor or mortgage servicer should be provided to consumers in connection with the validation notice. If these documents are not required in connection with the validation notice, what would be the costs and benefits of debt buyers and third-party collectors obtaining or obtaining access to this documentation when the debt is sold or placed for collection? 8

9 As mentioned above, on average, less than 1% of accounts sold or placed for collection result in consumer disputes. As such, requiring the last periodic statement or billing statement to be provided with the validation notice at the time of placement or sale would be unduly burdensome and expensive for the businesses that operate in the industry. This undue burden and expense would not have a corresponding benefit (or if so, such perceived benefit would be dramatically outweighed by the burden and expense) and could be detrimental to the consumer because of data security and privacy risks (e.g. mailing to an inaccurate address) for the 99% of accounts not subject to dispute. Q10. Are there other types of documents that would be useful for debt buyers and third-party collectors in their interactions with consumers? What types of documentation would it be most beneficial to consumers for debt buyers to have or have access to? For instance, would it be beneficial to consumers for debt buyers to have: (1) A contract or other statement evidencing the original transaction; (2) a statement showing all charges and credits after the last payment or charge-off; or (3) a charge-off statement? What would be the costs and benefits of debt buyers and third-party collectors obtaining or obtaining access to each of these types of documentation when a debt is sold or placed for collection? Should a consumer dispute the debt, the last statement typically suffices for consumers to recognize the debt. It is important to recognize, however, that the provision of additional documentation is beneficial to all participants in the debt-collection cycle (including consumers) only if and when the debt is disputed. The provision of such documentation upon placement or sale of the debt would be unnecessary and unduly burdensome, as the consumer would not yet have disputed the existence or amount of, or responsibility for, the debt. Q11. What privacy and data security concerns should the Bureau consider when owners of debts provide or debt buyers and third-party collectors obtain or obtain access to documentation and information when a debt is sold or placed for collection? In many cases, debt owners, third-party debt collectors and debt buyers already use secure repositories to transmit encrypted data. Sensitive personally identifiable information should not, however, be electronically transmitted without commercially reasonable data privacy and security protocols in place, in accordance with all relevant privacy and data security laws, including the privacy and data security provisions of the HIPAA and Gramm-Leach-Bliley Act, as well as any applicable state laws. Technological Advances Q12. Would sharing documentation and information about debts through a centralized repository be useful and cost effective for industry participants? If repositories are used, what would be the costs and benefits of allowing consumers access to the documentation and information about their debts in the repository and of creating unique identifiers for each debt to assist in the process of tracking information related to a debt? What privacy and data security concerns would be raised by the use of data repositories and by permitting consumer and debt collector access? Would such concerns be mitigated by requiring that repositories meet certain privacy and security standards or register with the CFPB? What measures, if any, should the Bureau consider taking in proposed rules or otherwise to facilitate the debt collection industry's use of repositories? What rights, if any, should consumers have to see, dispute, and obtain correction of information in such a repository? Although there are several vendor-operated systems that act as a centralized repository for accounts receivable management information, there is not a current industry standard. For an inclusive 9

10 system, debt owners would need to provide original documentation to be accessed by third-party debt collectors and debt buyers, which could be a costly and lengthy process. Unlike consumer reports, documentation and information related to debts in the collection cycle are not used for credit or employment eligibility decisions regarding the consumer. The documents and information are private documents between business entities that have a business relationship. As such, consumer access rights would not be appropriate. Moreover, consumers already have avenues to address concerns with respect to the collection of debts, including the filing complaints with federal and/or state regulators and private rights of action for alleged statutory violations. Information Debt Owner, Debt Buyer, or Third-Party Collector Provides to Consumer Upon Sale or Placement of Debt Q13. Do debt owners, buyers of debt, or third-party collectors currently notify consumers upon sale or placement of a debt, other than through the statutorily-required validation notices or through required mortgage transfer notices? Unlike transfers of mortgage servicing, there is not currently a requirement for debt sellers to send a goodbye letter to consumers, nor for a hello letter to be sent by debt buyers. Debt owners, however, routinely inform the consumer of their last contact before the debt gets placed with a thirdparty debt collector, and the third-party debt collector routinely sends a letter (including the validation notice) that informs the consumer that the debt owner placed the debt with it. An additional goodbye/hello requirement would be unnecessary in this context. Q14. What would be the costs and benefits of requiring notification to a consumer when a debt has been sold or placed with a third-party for collection? If such a notice were required, what additional information should be provided to the consumer and what would be the costs and benefits of providing such additional information? Most third-party debt collectors notify consumers in writing when a debt is placed for collection with their company, including the required validation notice. These actions follow upon a debt owner s customary final demand letter mailed as part of internal business operations for accounts receivable. As such, a separate notification to the consumer would be unnecessary and add additional expense to the sender of the notice for the costs of production and delivery of the notice. Should a notice be required, however, the CFPB should create a model notice for the sender to use that would, if used, provide the sender with a safe harbor against regulatory enforcement and private rights of action, and such notice should be permitted to be sent electronically. Q15. What would be the respective costs and benefits of requiring a debt buyer or a debt owner to provide notice that a debt has been sold? What would be the respective costs and benefits of requiring that a third-party collector or a debt owner provide notice that a debt has been placed with a third-party for collection? In the context of a third-party debt collector that collects debt on behalf of a creditor or debt owner, such a notice would be redundant given that consumers are typically informed by the creditor or debt owner that a delinquent debt will be placed with a debt collector as well as through the initial contact by the debt collector. 10

11 VALIDATION NOTICES, DISPUTES, AND VERIFICATIONS (SECTION 809 OF THE FDCPA) Validation Notices Information in Validation Notices Related to Recognizing the Debt Current Owner of the Debt Q16. Where the current owner of the debt is not the original creditor, should additional information about the current owner, such as the current owner's address, telephone number or other contact information, be disclosed in the validation notice or upon request? Would this information be helpful to consumers so that they may contact the current owner directly about the debt, or about the conduct of its third-party collector? Including additional information regarding the current owner in the validation notice has a likelihood of confusing consumers, resulting in the consumer expending time and resources to contest a valid debt because he/she merely does not recognize the new debt owner s name. Also, the inclusion of such information in the validation notice may create inefficiencies and cause confusion as consumers may not understand which entity is the appropriate entity for the consumer to contact. Moreover, current debt owner information is available customarily on request, with the original creditor listed in the validation notice. In many instances, agreements between creditors or debt owners and third-party collectors include a provision that if the debt owner is contacted directly by a consumer after the debt has been placed for collection, it will refer the consumer to the debt collector to handle the inquiry. The vast majority of creditors and debt owners do not maintain the resources to monitor and manage outsourced debts, and to the extent they do, such a provision serves to ensure clarity for the consumer as to which party is attempting to collect the debt. Itemization of Total Amount of Debt Q17. Are there other approaches to itemization of the total amount of debt on validation notices that the Bureau should consider, and if so, for what type of debts should this itemization apply? For example, the Bureau recognizes that the three alternatives described above might work best for credit-based debt. Are there other approaches that might work better for other types of debts? Are there advantages to consistency in itemization across different types of debt or would it be more helpful, for consumers and collectors alike, to require different itemizations standards depending on the type of debt? Or could a standard set of information be required, with certain augmentation for specific types of debt? If the CFPB were to establish a list of acceptable options to respond to debt validation inquiries, or otherwise mandate a standard, potential conflicts with state law would be an issue. Regardless, the inherent danger of applying a one-size-fits-all approach to itemization requirements is problematic because of the vast differences in types of debt and industry participants. To the extent that any benefits to requiring itemization outweigh competing considerations, it would be incredibly burdensome to provide itemizations for every debt being collected, rather than only the limited volume of debts that are disputed based on the amount owed. If any itemization would be required, the itemization should include only those fees and charges that are lawfully added to the debt by the specific debt collector that is attempting to collect the debt. 11

12 Specific itemization should not be required; it should only separately include the balance upon placement of the debt with the debt collector, the total of any post-placement charges and the total of any post-placement fees. Additional Information Q18. What additional information should be included in the validation notice to help consumers recognize whether the debts being collected are owed by them or respond to collection activity? For example, which of the following pieces of information would be most useful to consumers? The name and address of the alleged debtor to whom the notice is sent The names and addresses of joint borrowers A partial Social Security number of the alleged debtor The account number used by the original creditor or a truncated version of the account number Other identifying information The name of the original creditor (if different from current owner) The name of the brand associated with the debt, where different from the original creditor (e.g., the name of a retail partner on a private label or co-branded credit card, or the name of the person providing the periodic statement for closed-end mortgages) The name of the doctor, medical group, or hospital for medical bills ancillary to their provision of services (e.g., a testing laboratory) Type of debt (e.g., student loan, auto loan, etc.) Date and amount of last payment by the consumer on the debt Copy of last periodic statement To what extent is this information available to debt collectors and debt buyers and what would be the cost of requiring that it be included in the validation notice? What privacy concerns would be implicated by providing any of this information (e.g., the name and addresses of joint borrowers, partial Social Security numbers, and account numbers) and how might the Bureau address such concerns? The overwhelming majority of consumers recognize their debt under current procedures. As stated earlier, on average, less than 1% of consumers dispute the debt. As such, additional information and documentation is unwarranted when sending the validation notice and would be unduly burdensome. Statements of Consumers Rights Set Forth in the FDCPA Q19. Are the statements currently provided to consumers regarding these FDCPA rights understandable to consumers? If consumers do not understand the statements that collectors currently include on validation notices as to their FDCPA rights, please provide suggested language for how these statements should be changed to make them easier to understand. Although ACA does not have any empirical data to demonstrate consumers understanding of the legally-required validation notice, we believe the validation notice to be relatively straight forward, understandable and of appropriate length. Nonetheless, should the CFPB add or change the statements made in the validation notice, the CFPB should create a model notice that would, if used, provide the debt collector with a safe harbor against regulatory enforcement and private rights of action. Q20. Should consumers be informed in the validation notice that, if they send a timely written dispute or request for verification, the debt collector must suspend collection efforts until it has 12

13 provided the verification in writing? Would any other information be useful to consumers in understanding this right? Should consumers be informed in the validation notice of their right to request that debt collectors cease communication with them? In the validation notice, consumers are provided with contact information to discuss or dispute the debt. Given that debt collectors must suspend collection until the disputed debt is verified, a requirement that the consumer be informed of such action provides no tangible consumer benefit relative to the primary right to dispute. While the consumer has the right to cease collections communications under the FDCPA, disclosing that right in the validation notice accords it with a level of significance not provided to other important aspects of the FDCPA. The addition of other existing rights or aspects of the FDCPA in the validation notice would also overshadow the importance of the consumer s right to request verification of the debt. Also, merely stating the consumer s right without disclosing the corresponding effects of ceasing collections communications would cause more consumer harm than the disclosure of the consumer s right affords. Q21. Are there any other rights provided in the FDCPA that should be described in the validation notices? For example, would it be helpful to consumers for the validation notice to state that the consumer has the right to refer the debt collector to the consumer's attorney, to inform a debt collector about inconvenient times to be contacted, or to advise the collector that the consumer's employer prohibits the consumer from receiving communications at work? If so, please identify the costs and benefits of including each right that should be included in the validation notices. While the rights listed above specify certain rights under the FDCPA, listing them in the validation notice accord these rights with a level of significance not provided to other important aspects of the FDCPA. The addition of other existing rights or aspects of the FDCPA in the validation notice would also overshadow the importance of the consumer s right to request verification of the debt. Moreover, these additions would significantly increase the length of the notice containing information related to validating the debt, effectively making it more difficult for consumers to understand this important right in the debt collection process or making the reading of such a disclosure more daunting to the consumer. Q22. What would be the costs and benefits of disclosing FDCPA rights in the validation notice itself, as opposed to the Bureau developing a separate summary of rights document that debt collectors would include with validation notices? Additional text and pages would increase the costs of production and delivery. To the extent the CFPB chooses to require the disclosure of rights in the validation notice, or a separate summary of rights, the CFPB should create model language that would, if used, provide the debt collector with a safe harbor against regulatory enforcement and private rights of action. Moreover, to the extent that the CFPB deems that a separate summary of rights is appropriate, the CFPB should allow for a model summary to be accessed online, with the debt collector required to provide the webpage address rather than the entire content with the validation notice. 13

14 Format and Delivery of Validation Notices Format Q23. What additional information do debt collectors typically include on or with validation notices beyond the mandatory disclosures? Do debt collectors typically include State law disclosures on the validation notices? If so, do debt collectors typically use a validation notice that contains the State law disclosures from multiple States, or do debt collectors typically tailor validation notices for each State? Debt collectors typically include some version of the following information with the validation notice: name/address/contact information for the third-party debt collector, the original creditor name and account information, including balance due and/or date of service, and all state required notices. Most collectors provide one letter with the federal and all applicable state notices. Q24. How common is it for collectors to communicate with consumers or provide validation notices in languages other than English? Some debt collectors may choose, based on their clients, demographics, and areas of operation, to provide notices in Spanish, upon notice or request. The practice of providing validation notices in languages other than English, however, remains very rare. Q25. If collectors were sometimes required to provide validation notices in languages other than English, what should trigger that obligation? For example, should it be triggered by the request of the consumer, by information from the original creditor indicating that the consumer communicated in a language other than English, by the language used in the original credit contract, or by information gathered by the collector during the course of its dealing with the consumer? What would be the costs of requiring validation notices in languages other than English using each of these triggers? It would be reasonable for subsequent communications to proceed in the language of the underlying contract, service agreement or transaction. To require translation for circumstances in which the consumer engaged in an underlying transaction by means of the English language, however, would result in significant cost to debt collectors, many of which are small businesses. Method of Delivery of Validation Notices Electronic Delivery of the Validation Notice Q26. Do collectors currently provide validation notices to consumers electronically? If so, in what circumstances, by what electronic media (e.g., ), and in what format (e.g., PDF, HTML, plain text)? It is not a general practice to provide validation notices electronically because of the risk of potential disclosure of a debt to a third-party. Q27. Does the consent regime under the E-Sign Act work well for electronic delivery of validation notices? If a consumer consents to electronic disclosures pursuant to the E-Sign Act prior to the account being moved to collection, are debt collectors currently requiring E-Sign consent again when the account moves into collection? When the account is sold or placed with a new collector, is 14

15 the new collector currently requiring a new E-Sign consent? If a consumer consents to electronic correspondence, what process do debt collectors currently require to revoke this consent? Generally, the consent regime under the E-Sign Act would work well for electronic delivery of validation notices. Clear guidance or authority for debt collectors to use electronic communication would likely need to supersede or, at minimum, comprehensively address concerns related to the FDCPA third-party disclosure prohibition. To the extent third-party debt collectors electronically deliver required disclosures, they typically require E-Sign consent to be provided again, when a debt is placed with them. Such consent is limited to that particular debt collector. A consumer can revoke consent at any time by notifying the third-party debt collector. Consumers Use of Electronic Means to Fulfill Writing Requirements for Exercising Rights Described in Validation Notice Q28. Do debt collectors currently treat s, text messages, or other forms of electronic communications as satisfying the in writing requirement to exercise the three rights described above? If so, what would be the costs and benefits of treating them as satisfying the in writing requirement? Many debt collectors treat as satisfying the in writing requirement. An appropriate framework around the electronic delivery of disclosures, notices and information, along with the electronic exercise of existing rights, would be beneficial to all parties. Consumer Testing of Validation Notices Q29. Have industry organizations, consumer groups, academics, or governmental entities developed model validation notices? Have any of these entities or individuals developed a model summary of rights under the FDCPA that is being given to consumers to explain their rights, or a model summary of rights under State debt collection laws? Which of these models, if any, should the Bureau consider in developing proposed rules? ACA has a model validation notice that has been used by the industry for over 15 years. While some entities may have developed a model summary of rights under the FDCPA, the use of such a summary is not a widespread practice in the industry given the strict liability nature of the FDCPA. Q30. Is there consumer testing or other research concerning consumer understanding or disclosures relating to validation notices that the Bureau should consider? If so, please provide any data collected or reports summarizing such data. ACA is not aware of any consumer testing or other research concerning consumer understanding or disclosures relating to validation notices. Disputes and Verification Definition, Types, and Timing of Disputes Q31. What types of consumer inquiries do debt collectors currently treat as disputes under the FDCPA? What standards do debt collectors currently apply in distinguishing disputes from other types of consumer communications? What data exist to indicate the percentage of debts that are 15